Azoty in Africa
October 31, 2013
The Azoty group, Poland’s largest fertilizer producer, has started extracting phosphate rock from its newly acquired deposits in Senegal.
The company has already shipped the first batch of the rock to its production facilities in Police near Szczecin, northwestern Poland. On their way back, the ships took the finished product—Polish fertilizers—to Africa.
At the end of August, Azoty bought into a company with a license to extract phosphate rock in Senegal. The Polish company needs the rock to produce multi-component fertilizers at the Police chemical plant.
“We want to ship in 100,000 metric tons of phosphate rock from Senegal by the end of this year, followed by a further 400,000 tons next year,” says Krzysztof Jarosiński, CEO of the Police factory and vice-president of the Azoty group.
Once Azoty extracts 100,000 tons of the raw material, it will have to pay another installment of $7 million for the African company. The total value of the deal is $28.85 million, or more than zl.90 million.
The Police plant needs 1 million tons of phosphate rock a year on average. Previously, the plant obtained this from countries such as Algeria, Syria, Tunisia, Morocco and Egypt. Over the last six years the plant has purchased phosphate rock at $166 per ton on average. Meanwhile, the cost of obtaining the rock from the group’s own deposits in Senegal will be no more than $90 per ton.
“The investment in Africa will definitely improve the competitiveness of the Police factory on the market,” says Bartłomiej Smolarek, a director at the mergers and acquisitions department of consulting firm EY in Poland. “Thanks to the deal, the company can now obtain raw material at half its previous price and enjoy stable supplies. Although the project is still in its early stages, the results are already visible, because the suppliers it has used up to now are offering the Police factory phosphate rock at lower prices.”
The Lam Lam deposit in Senegal is expected to last four years. Then Azoty will begin extraction from another deposit, called Kebemer, which is much larger and holds enough raw material for 56 years of extraction, according to the company’s estimates. But that deposit is still being examined in detail.
At the same time, Azoty has begun selling its fertilizers in Africa. So far, its sales in that region have been marginal, despite the fact that its competitors have been there for years. So far Azoty has shipped 24,000 tons of fertilizers to Africa.
“We aim to sell 100,000 tons annually beginning next year,” says Jarosiński. “Africa offers good prospects, which is why, in addition to selling fertilizers, we plan to start educating local farmers.”
Unlike its biggest competitors, Azoty did not have its own sources of raw material until now. This year has proved to be a turning point for the Polish fertilizer manufacturer. In addition to its project in Africa, the group is working with Polish copper giant KGHM to secure a license to drill for sylvinite in the north of Poland. This is another key raw material for the group, alongside phosphate rock, but extraction will not start until several years from now at the earliest.